It was the first big weekend of the year and it had all the signs of going off with a bang, but…
That was deafening.
And there are some worrying echoes.
First, the big bang:
There’s still a wave of pent-up demand, much of it dating back to last year. Once people have made the decision to move (or circumstances demand it) there’s usually a period of quiet optimism – getting to know what’s out there, no rush – and then there will be a property or two which really appeals and, not unusually, goes to others; and then disquiet starts to gnaw. How much higher can prices go? Is it now or never?
All of which can add up to some very anxious people offering numbers they never expected and may regret. Which helps to explain days like Saturday.
There were numerous auctions where four or more bidders were still in there well beyond the reserves and there were prices 10-15% and more above what we believe is fair value (and even that is well above what it was just six months ago). Particularly stressed were those putting up their hands at between $1 and $3 million.
Can it go higher? Is another 10-25% possible? Yes. And yes.
Can that go on? Not unless someone has repealed the law of gravity.
How volatile does it get?
About a week ago, 1002 Malvern Road, Armadale, a large Victorian house on 12,000 square feet, sold before auction for $2,825,000. On Saturday, four doors up at 122 Kooyong Road, a smaller Victorian on 8,000 sq feet sold for an impressive $2.7 million against a reserve of $2.4 million. One property was an outstanding buy and the other truly expensive and just 8 days separated them. Why? What (or who) persuaded Malvern Road to sell? What persuaded six people to go head-to-head and so far over the top in Kooyong Road?
2 Selbourne Road, Toorak, a modern townhouse, sold for a very large $4.75 million after being passed in at $4.6 million (someone couldn’t wait for the Easter bunny?). A grand, renovated-by-the-local-RSL (not their forté) Victorian mansion at 23 Loch Street, St Kilda West had nine bidders who took it to $4.1 million. No surprise there, but still quite a clutch of under-bidders who, presumably, are ready to put their hands up elsewhere.
Boroondara. A student from mainland China saw the property for the first time only minutes before the auction … and bought it. Impulse buying is supposed to be restricted to supermarket checkouts. Now it’s houses?
Even in paddocks we don’t often play in – investors and apartments – close to the city there have been prices paid that only astronomers could comprehend.
And the hangover from last year’s very top end expressions of disinterest campaigns has been relieved, a little, by a new owner at 10 Heyington Place. In the end there were two interested buyers and one genuine seller. How do we know? Well…
But it’s still those echoes which worry. Not so much of a problem at the very top end, but head down the scale and you will quickly find the over-stretched. Head all the way to the first-home buyers and you’ll find what for some is a recipe for misery.
It’s not good. Not good for individuals and not good for a society which is increasingly becoming split along lines of those who can afford somewhere they are happy to live and those who cannot.
There are two elements to what we believe is now an unhealthy market: one is the seemingly inexorable rise in prices, the other is the volatility which shakes confidence among both buyers and sellers and, in the end, helps no-one. Both are, we hope, exercising the minds of those in government and at the Reserve Bank.
For now, the rise and rise continues, but history suggests it’s unsustainable.
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Bayside takes plunge
Last week it looked like Bayside buyers were dipping a toe into the water before deciding to stay dry or to dive back into the market.
Not this week. Now there are rows of wet Speedos hanging on the line. There were strong clearance rates at auction and numbers of sold-priors and private sales; while properties passed in at auction were rare (and mostly due to getting prices well and truly wrong).
Bentleigh powered along with 16 sold from 18 auctions; with multiple bidders and prices mostly above expected. Bentleigh East is the local darling: strong buyer support and two properties topping the million dollar mark.
Beaumaris and Black Rock had a big week with the former recording 11 auction and private sales for the week; the vast majority around the million dollar mark.
Exceptions were pass-ins at 6 Rennison Street ($1.7 million, reserve $1.95 million) and 374 Beach Road ($2.7 million on a vendor bid, reserve $2.9 million). Seems the Bayside top end can still be challenging.
Brighton and Brighton East sold 14 from 18 auctions and also recorded a handful of privately sold properties.
Among the successes, the standout was the unreported result under the hammer at 40 Sussex Street. It’s an unremarkable 70’s style single-level house of modest proportions on equally modest land of 700 sq m and expected to sell for $2.6-2.7 million based on two or three similar sales made less than three months ago. After an epic tussle, shortly after the auctioneer’s one and only opening bid of $2.6 million, it was knocked down for an astonishing $3.25 million – a mere half a million above expectation. If an underbidder is ever happy at missing out, it should be this one.
Also in the money are the vendors at 38 Montclair Avenue. A renovated and extended 1920’s brick house, its presentation and accommodation obviously appealed and $2.25 million was the result.
2a Rippon Grove buyers were not confused by the address. It’s on the corner of South Road with views over Brighton Beach oval and out to the bay. On 1077 sq m, it sold under the hammer for $3.2 million.
One of the few passed-in properties was 44 Roslyn Street. A new spec house, it failed to excite and could only muster a vendor bid of $2.5 million before the reserve of $2.85 million was announced.
An orphan from last year, 7 Wagstaff Court, was dusted off and set to be auctioned again over the weekend, but a buyer felt the love and parted with $1.925 million prior to the auction. Group hug for all involved.
Less than 12 months ago, a landmark house at 186 Church Street – on the corner of Halifax Street – was privately sold for $2.65 million. With very little done to it, the price has since climbed $550,000; or over 20%. It sold again during the week for a very handy $3.2 million.
Brighton East was less busy than its cousin but included a result at last for another 2009 reject: 1 Collis Street. An as-new property on 650 sq m, it sold for $2.5 million.
1 Lansdown Street was not so fortunate. The highest bid was the auctioneer’s $1.8 million. A later offer brought that up to $1.825 million but still nowhere near the vendor’s now stated reserve of $2,050,000.
13 Alicia Street, Hampton, also profited from a stronger 2010, selling for $4.17 million following an expression of interest mini campaign. It’s a substantial resort of a property with pool and court and languished on the market earlier last year with no takers at mid-$4 millions.
The vendors of 31 Gordon Street, Hampton, will be hoping to do still better. They’re looking for $5 million or more in an expressions of interest campaign. Expect a sale soon.
Dreadnought Street, Sandringham, has become a classification of its own. Three sales in a week:
- Number 9. Standard two-storey townhouse, sold at auction on Saturday for $877,000.
- Number 15 was sold at auction on Sunday for exactly $1 million.
- Number 22-24 changed hands during the week for $1.8 million.
The Labour Day long weekend will give buyers who have been underbidders these past two weeks time to reflect on their buying strategies for the remaining auction weeks prior to Easter.
Some will decide to dig deeper if they must to buy into the most keenly sought locations. Others it will be a matter of reviewing what is on their must-have lists and to get the red pen out. And some will have little choice than to widen the geographic search area in an attempt to find the affordable.
The least advisable option is to do nothing in anticipation of the market going into a huge correction phase (or to crash as some would like). That said, it is patently obvious that the current heat in the market is not sustainable, nor healthy, and the sooner the market plateaus, the better for all concerned.
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